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www.ecommerce-guide.com/solutions/secure_pay/article.php/3330031
By James Maguire March 23, 2004 Continued from Page One.
BitPass Catering to smaller, independent content providers, BitPass charges no sign-up or monthly fees and is easy to set up. The company offers a "stored value" solution in which users deposit funds in an account; users can make purchases as low as a penny. The BitPass solution integrates so closely with a content provider's Web site that the transaction is nearly seamless, analysts report. The system's downside is that it has a small user base, which creates a hurdle: Potential buyers might be reluctant to sign up for a new service. BitPass is working to overcome this by streamlining its sign-up. "They have it down to a science," Cundiff said, noting that it takes only about a minute to activate an account. PayPal Clearly the 500-pound gorilla of online auction payments with 40 million users, PayPal enables merchants to benefit from its well-established brand name. Users know and trust it, Cundiff said. While it's owned by eBay, PayPal's 2004 strategy is based on building business in areas other than online auctions, he said. "They're working to have the PayPal logo next to Visa and MasterCard on regular retailers' site." PayPal benefits by allowing its consumer users to load their accounts using ACH (automated clearinghouse), the payment networks that banks use to route money through checking accounts. Processing is much cheaper than with using credit cards to load accounts, which enables PayPal to offer lower rates to merchants. PayPal is scheduled to launch a micropayment product offering this spring, and Cundiff expects them to quickly become the dominant player. "PayPal is positioned really well to win in the music download market," he said. Yaga A vendor that seeks to work with newspapers and magazines selling online content, Yaga's goal is to be a full-service payment solution: The company's technology supports both subscription and micropayment models. Additionally, "they can either maintain the content or just be the back-office payment network," Cundiff said. The company touts its capability to scale large enough to handle major archives, and they have a client list to prove it, including Time Inc., Ziff-Davis and Tribune Media. Peppercoin Instead of the usual stored value method, Peppercoin aggregates many small transactions into one large transaction. This means users' credit cards are charged only once for many transactions. So a series of $2 and $3 dollar purchases is charged as if it were one larger purchase, meaning content providers get a lower discount rate. Content providers encrypt their material using "Peppermill" encryption technology. While this provides protection, it also causes problems: "Peppercoin requires users to initiate a download to activate and use accounts, creating confusion at registration and point-of-purchase," Cundiff said. This will likely hinder growth in Peppercoin's user base, he said. Additionally, the company is still new, with only a few dozen merchants enrolled, and an undetermined number of account holders.
On the other hand, he said he thinks the years-old dream among Internet publishers -- in which surfers pay for all content -- remains only a pipe dream. "The idea that someone's going to pay $0.15 for every article -- I don't see that happening," Cundiff said. Advertising, rather than paying per article, continues to be a highly viable publishers model. But the advertising and micropayment models might merge into a hybrid. "Someone like a comics seller isn't going to survive on the advertising model," Cundiff said. He added, however, that comics sellers could offer paid products beyond what they're giving away for free, combining modest advertising revenue with income from micropayments. Gartner's Litan noted that the business growth of micropayment vendors like PayPal, BitPass, Peppercoin and Yaga will continue, "as long as the credit card companies don't want the business." The credit card companies are still uninterested in underwriting the legion of small auctioneers that powers eBay, she said. "The credit card companies have first dibs, and if they don't want it or it's not enough volume, then there's room for these other players," Litan said, adding that there will always be some sort of transactions that credit card companies don't want. Given this fact of Internet life, micropayments seem likely to play an important role in e-commerce's foreseeable future. James Maguire is a contributor to Ecommerce-Guide. |
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